Saving Just A Little More Can Make A Big Difference in Retirement

Key takeaways
• Consistently saving a little bit more can add up over time.
• Whether it's $10 or $100, saving money early in life, doing it consistently, and increasing the amount you're able to save over time can help you live the life you want in retirement.

Consistently saving a little bit more can add up over time.

Often it's the little things in life that can make the biggest difference. That's true when it comes to saving for retirement. Putting just 1% more into a tax- advantaged retirement account like a 401(k), an IRA could make a noticeable difference in your lifestyle in retirement. Whether you choose to make Roth or traditional contributions, the benefits of saving just a little more now can pay off later.

While 1% is a small percentage of your annual earnings today, after 20 or 30 years it can make a big difference in your account balance when you retire. That's because the longer you give your money a chance to grow, the better. And it works no matter how old you are—or how far off retirement is.
Let's look at some examples.

Increase your contribution by 1% and by retirement you could:

Have an additional $85,792* for a vacation home: Based on age 35, earns $60,000 per year, Less than $12 per week*
Have an additional $42,925* to spend on traveling: Based on age 45, earns $70,000 per year, Less than $14 per week*
Have an additional $16,779* to spend on anything: Based on age 55, earns $80,000 per year, Less than $16 per week*

As you can see in our examples, small weekly amounts like $12, $14, and $16 can make a noticeable difference in your savings.

So how do you find the money? Perhaps try bringing your lunch to work, getting rid of your land base phone (use cell phones), or one streaming service. The $12-$16 additional 401(k) contributions will come right out of your paycheck, so you may not even miss the spending money, and it will lower your taxes!

If a one-time increase bump-up isn’t ideal now, consider aiming to increase contributions each year. For instance, if your 401(k) lets you set automatic increases every year, consider signing up. If you usually get a raise each year, you may be able to time the increase to happen when you get a bump in pay so you won't feel the impact in your paycheck.

Consider saving 15%. We ran the numbers and determined that aiming to save 15% of income toward retirement annually—which includes any matching contributions or profit sharing an employer may make to a workplace retirement account like a 401(k) can help ensure that you can maintain your lifestyle in retirement.

Not saving that much? Don't fret. Few people get there overnight. Think of planning for retirement as a journey. The key is to save as much as you can now and try to increase savings over time. If possible, save at least enough to get any match from your employer.

Starting early, saving regularly, and increasing the amount you save as your income increases will help you to achieve the retirement you envision.

Don't have an IRA? If you’re serious about retiring on time you should consider opening a Schwab IRA managed by Aspetuck Financial Management. Even if you have a 401(k) at work, you can contribute $6,000 to your own IRA if you are under age 50 and $7,000 if age 50 or older. Saving $50 more a month, or $600 a year, can make a real difference in the long run.



*Approximation based on a 1% increase in contribution rate. Continued employment from current age to retirement age, 67. We assume you are exactly your current age (in whole number of years) and will retire on your birthday at your retirement age. Number of years of savings equals retirement age minus current age. Nominal investment growth rate is assumed to be 5.5%. Hypothetical nominal salary growth rate is assumed to be 4% (2.5% inflation + 1.5% real salary growth rate). All accumulated retirement savings amounts are shown in future (nominal) dollars. This assumes no loans or withdrawals are taken throughout the current age to retirement age.